ET View: Minimum income scheme old wine in a new bottle?

The question really is whether this will supplant other subsidy schemes or supplement them.

ET Bureau|

Jan 28, 2019, 06.42 PM IST

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Congress President Rahul Gandhi

Congress President Rahul Gandhi’s promise of minimum income guarantee for every poor in the country, if the Congress is voted to power, is not a radically new idea. He is only re-inventing the wheel and possibly pre-empting a similar offer in the making from the BJP.

India already has a basic income scheme for the poor, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), that guarantees 100 workdays every year at minimum wage, to whoever wants it. This is a dole, the work part is supposed to be a self-selection method: for people who are willing to turn up to do manual jobs so that landlords do not claim the benefit.

And the cost is estimated at about 0.3% of GDP, much lower than the Universal Basic Income Scheme that only developed economies can afford. So, if the so called minimum income guarantee scheme is limited to the poor, and replaces the MNREGS and other subsidies like old age pension, the tab on the exchequer may not be huge. It would also be lower than a farm loan waiver.

The question really is whether this will supplant other subsidy schemes or supplement them. If the income guarantee scheme is added on to other schemes that include a farm loan waiver, will the Centre have the fiscal capacity to deliver the scheme? Certainly not, when tax revenues (centre and states combined) are at a mere 16.5% of the GDP unless, we are okay with running up a high fiscal deficit.